President Donald Trump’s words, actions, and inactions can move the market – the Trump effect already moves stocks, commodities, forex, and the general economy. The Trump effect is understandable based on the fact that Trump wields huge power as the President of the United States. However, the Trump effect is being amplified in the socio-political, economic, and financial landscapes because Trump seems to thrive on controversy.

In the buildup to the 2016 elections, Trump was a constant feature in news headlines for the most controversial statements. During the campaigns, Trump made some ‘unconventional’ promises that the mass media, his critics, and political elites often dismissed as the ramblings of someone that doesn’t understand the workings of government. However, since taking the Oath of Office on January 20, Trump has set in motion the mechanisms to actualize many of his campaign promises.

Now, economists are scared that Trump could usher in a wave of uncertainty of epic proportions in the global economic and geopolitical landscapes. This post provides insights into some of the reasons economist are worried about how the global economy might fare under Trump.

Economists at Fitch Ratings are worried about what the future holds

Economists at the international rating agency, Fitch Ratings have submitted that Trump posses significant risks to the global economy going forward. Fitch is one of the three main rating firms that provide insights into the creditworthiness of countries, states, and firms that issue debt.

The economists note that the Trump administration is pushing unconventional and borderline controversial foreign and economic policies. They observed that “US policy predictability has diminished, with established international communication channels and relationship norms being set aside and raising the prospect of sudden, unanticipated changes in US policies with potential global implications. ” The sudden change and unpredictability in U.S. foreign policy in turn makes it harder for other countries to know what to expect in terms of trade with the U.S. going forward.

More so, the analysts noted that Trumps vocal stance on renegotiating trade deals could cause massive ripples through the global forex markets. In their words, the air of uncertainty in global trade could lead cause “disruptive changes to trade relations, diminished international capital flows, limits on migration that affect remittances and confrontational exchanges between policymakers that contribute to heightened or prolonged currency and other financial market volatility.”

Goldman Sachs is worried that Trump a trigger a war with China

Economists at Goldman Sachs are also worried about what the implications of Trump’s economic policies on the global economic landscape. The analysts are especially worried that some policies of the Trump administration could trigger a trade war with China. To start with, Trump has accused China of unfair forex practices as well as ‘theft’ of American jobs. In addition, Trump’s trade adviser, Peter Navarro has asked for a 45% tariff on goods made in China.

The analysts specifically observed that the presidency “is likely to make an announcement on China’s currency policy and impose unilateral tariffs on a number of products.” The analysts also observed that “China would definitely retaliate and would likely go above and beyond the US measures, potentially imposing tariffs as high as 80, 90% on imports from the US.”

Conclusion

Economists however believe that Trump administration will eventually find middle ground and drop some of its most polarizing foreign policies. Victor Alagbe, an analyst at 24option submits that “the air of uncertainty trailing Trump’s administration won’t continue indefinitely  because the U.S. government will eventually embrace a consistent business- and trade-friendly framework that combines the best of existing foreign policies with new ideas from a career businessman.” 

Nonetheless, the global economists could also enjoy some positives from the policy stance of Trump’s administration. For instance, Trump’s plan to boost spending on infrastructure could boost the construction sector and boost the ease of doing business in the U.S. More so, his plan to push major tax cuts and tax reforms as well as reducing regulatory requirement on banks could also boost the economic prospects of the world.